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MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 1987-44
Conflicts: representation of defendant where members of firm will benefit from plaintiff’s suit
In your inquiry, you state that your firm has been requested by a long standing client, the developer of a condominium, to defend it in an action brought against it by the Council of Unit Owners of the condominium. The complaint apparently alleges several design and construction defects as well as fraud in the inducement and breach of contract in connection with the sale of the units. You have explained in your inquiry that the Council of Unit Owners is an entity comprised of all of the owners of the condominium units, and by statute is the legally constituted entity with express authority to sue in its own name on behalf of itself or two or more unit owners on matters effecting the condominium, and generally, to govern the affairs of the condominium. You further indicate that pursuant to the statute and the bylaws of the condominium the power to govern the condominium has been delegated to a board of directors which, in this particular case, decided to bring the action against your client/developer in the name of the Council of Unit Owners of the condominium.
You have also informed us that two members of your firm are owners of uni.ts in the condominium. These two attorneys, however, are not members of the board of directors of the Council of Unit Owners, are not individually named parties in the litigation, are not directly affected by any of the alleged defects, did not consent to the litigation, and apparently do not believe that the claims are meritorious.
Out of a concern for the possibility of the conflict of interest, your firm analyzed and then determined that the representation of the client would not be adversely affected by the ownership of condominium units by attorneys in your firm. It would appear from your inquiry that you have disclosed to your client the potentially conflicting influences, and you indicate that your client after consultation has consented to your firm's representation. Apparently, however, counsel for the Council of Unit Owners has objected to your representation of the developer on the ground that it is impossible for Plaintiff's counsel to maintain normal attorney/client confidences in meeting and communicating with the unit owners. As a result of the objection raised by opposing counsel, you seek the Committee's guidance as to whether a conflict of interest exists and/or whether withdrawal from representation is necessitated.
The primary guidelines relating to the subject of conflict of interest are set forth in Rules 1.7, 1.8, 1.9 and 1.10 of the Maryland Rules of Professional Conduct. We find Maryland Rule 1.7 (b) to be particularly applicable to the facts which you pose. This subparagraph provides as follows:
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interest, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after consultation.
The factual scenario which you have explained to us presents a situation where the interests of the attorney, or more specifically the interest of law partners of the attorney, may affect in a material way the attorney's representation of the client. See Rule 1.10 (Imputed Disqualification). A reading of Rule 1.7 reveals that a client may consent to the representation by the lawyer notwithstanding the existence of a conflicting interest. As is indicated by the language
used in subparagraph (b) (1) of Rule 1.7, such consent to representation will be effective to permit the lawyer to represent the client only when ""the lawyer reasonably believes the representation will not be adversely effected."" Using the words of the comments to Rule 1.7, such consent will not be effected ""when a. disinterested lawyer would conclude that the client should not agree to the representation under the circumstances.
In your inquiry, you indicate that your client has consented to the representation after full disclosure and consultation. For your information, we note that subparagraph (c) of Rule 1.7 discusses the extent and nature of the consultation required with your client and the term ""consultation"" is defined in the section of the Maryland Rules on Professional Conduct termed ""Terminology."" We assume that your disclosure to your client was in fact full, and the consultation adequate. In light of the knowledgeable consent on the part of your client, it appears to us that your representation of the developer is consistent with the dictates of Rule 1.7.
The fact that two members of your firm are owners of units in the condominium, in the opinion of the Committee, presents more of a tactical problem for your opponents than an ethical problem for your law firm. We note that situation faced by your opposing counsel -- logistical problems in maintaining the confidentially of the attorney-client communications -- is one which is not uncommon in litigation. While an attorney clearly has an obligation not to reveal information relating to representation of a client unless the client consents after consultation, Maryland Rule of Professional Conduct 1.6, there is no attorney/client relationship between the condominium or the Council of Unit Owners and your two law partners which would give rise to the existence of a duty not to reveal confidential information. The Committee also believes that appropriate protections may be implemented by the Council of Unit Owners and its legal counsel in order to safeguard the confidentially of communications. It should go without saying that your two law partners should not undertake any activity designed to undermine the protections which might be implemented by the Council of Unit Owners or otherwise attempt improperly to obtain confidential information for use by the developer.
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